Small Business and SMSF -- is there still opportunity?

Pre-pandemic, it seemed that every financial paper, blog or newsletter worth its salt was talking about the value of a Self Managed Super Fund (SMSF) for small and medium-sized business.

And suddenly, the line of conversation has paused. But that doesn’t mean that the opportunity is dead.

Advantages of an SMSF for small and medium sized business

In fact, there are many advantages for small business owners to set up an SMSF, even if they’re not supporting commercial premises, for the business itself.

Self-Managed Super Funds are designed to generate wealth for retirement, so the right structure is critical. As is getting the right advice about how to use an SMSF to your advantage.

And there are many advantages, most notably tax advantages, whether you have a commercial premises for your business, or choose to buy a property as an asset within the SMSF and rent it to someone else.

Some of the tax advantages include – low tax rates and in pension phase capital gains tax free and income tax free, also a SMSF has its own Land tax threshold.

And, if the business, for any reason, goes bankrupt and there is a list of debtors to pay, the SMSF is the last asset to be used for recovering and redistributing funds.

That said, there is one very serious caveat with an SMSF.

SMSFs need to be structured and managed well

In order for it to work effectively it needs to be managed effectively, and this can be time consuming. It also means getting regular professional advice, and “checking in’ – often – with how your investments are performing.

There are also a number of steps to take with set up and with ongoing reporting and record- keeping to ensure compliance. The fines for non-compliance can be hefty, but again, due diligence, an annual independent audit, and the right financial advice, at the right time, can help you to stay on track.

It’s also important to remember that SMSF’s should, ideally, include a range of investments.

Diversification is the key to risk management and healthy returns, over the long-term. SMSFs have the sole purpose (like all super funds) of providing funds for your retirement, so every investment decision must be made with that goal in mind.

Is an SMSF right for every business? No. But the question is worth asking, because when used properly, an SMSF can help your business to grow, while at the same time, hold astute investments working for your retirement.

If you want to know more, contact me.

Michael is a highly experienced Chartered Accountant (CA) and also a Fellow certified practicing accountant (FCPA). He is also a qualified Financial Planner, and a business mentor.

General Advice Warning

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to are of a general nature only and are based on Michael Mekhitarian’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Accuracy & Reliability of Information

Although every effort has been made to verify the accuracy of the information contained in this web site. Michael Mehkitarian, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

The opinions expressed are Michael’s and are not necessarily the same as those of ATB Chartered Accountants and Business Mentors.